When you decide to move from Denmark, there are many practical and legal issues to consider. One of the most important – and often overlooked – is the exit tax. Many who move abroad only discover too late that a miscalculation can cost hundreds of thousands of kroner.
What is exit tax?
The exit tax is a special tax that is triggered when you move from Denmark and thus cease to be fully liable to tax in this country. The tax is aimed at people who own shares or interests in companies, and functions as a kind of safety net for the state: it is intended to prevent gains on securities from evading Danish taxation when moving out.
In practice, this means that you are taxed on the unrealized gain on your assets as if you had sold them on the day you move out – even though you still own them.
Who is affected by the exit tax?
The exit tax typically applies to individuals who:
- Owns shares or interests in companies, such as an ApS or a holding company.
- Have a shareholding with a total value of over DKK 100,000 (the limit may change, so always check the applicable rules).
- Moves out of Denmark for tax purposes and becomes tax resident in another country.
Common mistakes – and how to avoid them
- Ignore the exit tax completely
Many people mistakenly believe that taxation only occurs when you sell your shares. However, with exit tax, you are taxed on the day you move out – even if you keep the shares. - Lack of planning
If you don’t create a strategy for your companies and stock holdings in good time, you could end up with an unexpected and very large tax bill. - Refrain from seeking a reprieve
In some cases, it is possible to apply for a deferral of tax payment so that you do not have to pay the full amount immediately. However, many people forget to apply – or apply incorrectly – and it can be expensive. - Overlook double taxation
If you move to a country where there is a risk of double taxation, it may be necessary to look into double taxation treaties to avoid the same gain being taxed twice.
How to prepare
- Get an overview of your assets well in advance of moving out.
- Consult an accountant or tax advisor who has experience with international moves.
- Find out if you can get a deferral of the exit tax.
- Make sure all paperwork and declarations are in place before the moving date.
Conclusion
Exit tax is one of the most complex areas of Danish tax law, and the consequences of ignoring the rules can be serious. With the right planning and advice, you can avoid costly mistakes and ensure a smoother transition to your new life abroad.
– Thomas Friis Nielsen (Business Lawyer and Tax Expert)